CA Sandeep Kanoi
The appellant had filed return of income on 30.09.2003. In the return, he left a note regarding capital gain stating that he deposited the said amount in his savings account with Vijaya Bank. He did not open “capital gain account” as contemplated by Section 54-F(4) of the Act. In view thereof, the Assessing Officer reopened the assessment under Section 148 of the Act to bring to tax the capital gains on the ground that the bank account, in which the amount was deposited was not capital gains scheme account. The assessee, in the return of income had declared Rs.24,57,000/- as capital gains liable to tax and paid the tax accordingly with interest, in response to the notice under Section 148 of the Act. The assessment, thereafter, was completed accepting the return, so filed in regard to the capital gains and the penalty proceedings under Section 271(1 )(c) were initiated.
The Tribunal while dealing with the reply filed by the assessee, took note of the fact that though the assessee had declared the transaction relating to income from capital gains and claimed exemption under Section 54 of the Act, he had not declared the same for the assessment year 2003-04 when the transaction had taken place during the previous year relevant to the assessment year 2003-2004 and that the assessee filed a revised return of income only after notice under Section 148 of the Act was issued, disclosing the transaction and admitting LTCG of Rs.24,57,000 for the assessment year 2003-04. Taking note of these facts, the Assessing Officer observed that the assessee had filed inaccurate particulars. However, penalty was imposed mainly on two grounds. Firstly, the assessee had not complied with the conditions laid down by Section 54(2) of the Act by way of depositing long term capital gain in a specified account before the date of filing of return of income under Section 139 (1) of the Act, and secondly, during the course of assessment proceedings and till the completion of the same, the assessee had not furnished any information regarding court matter-litigation against the purchase of new property. The Assessing Officer also noticed that the assessee had not invested the amount for purchase of residential property. These findings of the Assessing Officer were confirmed by the first Appellate Authority and then by the Tribunal.
At the outset, we find that the Assessing Officer quoted wrong provision of law viz., Section 54 when admittedly; the exemption was claimed under Section 54F of the Act. The assessee had sold a plot of land for Rs.30,00,000/- vide registered sale deed dated 11-12-2002 and he was supposed to invest/utilize the said amount for purchasing a residential house on or before 10-12- 2004 or to construct a residential house on or before 10-12-2005 as contemplated by Section 54F of the Act. The assessee accordingly had paid Rs. 13,00,000/- as earnest money on 3 1-07-2003 for purchasing a property and then he paid Rs. 10,00,000/- on 15-10-2003, Rs.3,00,000/- on 17- 10-2003 and Rs.70,000/- on 15-12-2003. Accordingly, he paid to the owner of the property Rs.26,70,000/- before 10-12-2004. The cost of the property was Rs.27,36,000/- Thus, hardly Rs.66,000/- were in balance. Since the property was in litigation, the transaction was not completed. The Assessing Officer, in the order, observed that the assessee had not furnished any information regarding the Court matter-litigation against the said property. This observation is factually incorrect. In paragraph-5 of the reply dated 25-5-2006 the assessee had clearly made reference to the copies of the court paper and stay order in respect of said property which were enclosed with the reply. The respondents have not disputed this before us. It is true that the assessee had not deposited the long term capital gain in the capital gain account, and he had deposited the said amount in his savings account with Vijaya Bank. However, it is not in dispute that he paid Rs.26,70,000/- to the owner of the property from the said account. Having considered the overall facts and circumstances of the case, in our opinion, the Assessing Officer ought to have exercised the discretionary powers, while considering to impose penalty under Section 271(1 )(c). That apart, the assessee in response to the notice under Section 148 of the Act had paid LTCG tax and interest. In our opinion, against this backdrop, this is a fit case where the Assessing Officer ought not to have imposed any penalty in exercise of the discretion vested in him. The order imposing penalty, thus deserves to be set-aside. Order accordingly. No order as to costs.